Analyze potential savings, monthly payments, and break-even points for your business property.
Current Loan Details
New Refinance Details
Refinance Analysis Results
Current Monthly Payment
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New Monthly Payment
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Monthly Cash Flow Savings
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Break-Even Period
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Total Lifetime Interest Savings
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Understanding Commercial Loan Refinancing
Refinancing a commercial mortgage or business loan is a strategic move designed to improve cash flow, reduce interest expenses, or pull equity out of a property. Unlike residential refinancing, commercial refinancing involves complex factors like debt service coverage ratios (DSCR) and prepayment penalties.
When Does Refinancing Make Sense?
A business should consider refinancing in several scenarios:
Interest Rates Drop: If market rates are significantly lower than your current note rate.
Improved Credit Profile: If your business revenue has grown or your credit score has improved since the original loan was issued.
Balloon Payment Approaching: Many commercial loans have 5- or 7-year terms with balloon payments; refinancing allows you to reset the term.
Cash-Out Requirements: To fund expansion, renovations, or consolidate high-interest business debt.
Example Calculation
Imagine you have a $1,000,000 balance on a warehouse loan at 6.5% interest with 15 years remaining. Your monthly payment is approximately $8,711. If you refinance into a new 20-year loan at 4.5% with $15,000 in closing costs:
New Payment: $6,326
Monthly Savings: $2,385
Break-Even: 6.3 months
Total Interest Savings: Refinancing helps lower your immediate monthly obligation significantly, though extending the term may increase the total interest paid over time if not managed carefully.
Key Metrics to Monitor
Break-Even Point: This is the time it takes for your monthly savings to cover the upfront costs of refinancing (closing costs, appraisal fees, legal fees). If you plan to sell the property before reaching this point, refinancing may not be beneficial.
Total Interest: Extending your term (e.g., from 10 years to 25 years) will lower your monthly payment but might increase the total interest paid over the life of the loan. Use this calculator to compare the long-term impact.
function calculateRefinance() {
var balance = parseFloat(document.getElementById('currentBalance').value);
var currentRate = parseFloat(document.getElementById('currentRate').value) / 100 / 12;
var currentTermMonths = parseFloat(document.getElementById('remainingTerm').value) * 12;
var newRate = parseFloat(document.getElementById('newRate').value) / 100 / 12;
var newTermMonths = parseFloat(document.getElementById('newTerm').value) * 12;
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
if (isNaN(balance) || isNaN(currentRate) || isNaN(currentTermMonths) || isNaN(newRate) || isNaN(newTermMonths) || isNaN(closingCosts)) {
alert("Please enter valid numbers in all fields.");
return;
}
// Monthly Payment Formula: P * [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var currentPayment = (balance * currentRate * Math.pow(1 + currentRate, currentTermMonths)) / (Math.pow(1 + currentRate, currentTermMonths) – 1);
var newPayment = (balance * newRate * Math.pow(1 + newRate, newTermMonths)) / (Math.pow(1 + newRate, newTermMonths) – 1);
var monthlySavings = currentPayment – newPayment;
var breakEvenMonths = closingCosts / monthlySavings;
var totalCurrentInterest = (currentPayment * currentTermMonths) – balance;
var totalNewInterest = (newPayment * newTermMonths) – balance;
var totalSavings = totalCurrentInterest – totalNewInterest – closingCosts;
// Display Results
document.getElementById('resultsArea').style.display = 'block';
document.getElementById('resCurrentPay').innerText = '$' + currentPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resNewPay').innerText = '$' + newPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (monthlySavings > 0) {
document.getElementById('resMonthlySavings').innerText = '$' + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resMonthlySavings').style.color = "#059669″;
} else {
document.getElementById('resMonthlySavings').innerText = '$' + Math.abs(monthlySavings).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + " (Increase)";
document.getElementById('resMonthlySavings').style.color = "#dc2626";
}
if (breakEvenMonths > 0 && breakEvenMonths < 600) {
document.getElementById('resBreakEven').innerText = breakEvenMonths.toFixed(1) + " Months";
} else if (monthlySavings <= 0) {
document.getElementById('resBreakEven').innerText = "Never";
} else {
document.getElementById('resBreakEven').innerText = "Instant";
}
document.getElementById('resTotalSavings').innerText = '$' + totalSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (totalSavings < 0) {
document.getElementById('resTotalSavings').style.color = "#dc2626";
document.getElementById('savingsNote').innerText = "Note: Extending the term increases total interest paid over time despite lower monthly payments.";
} else {
document.getElementById('resTotalSavings').style.color = "#059669";
document.getElementById('savingsNote').innerText = "Calculated based on interest saved minus the cost of refinancing.";
}
// Smooth scroll to results
document.getElementById('resultsArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}